"Cocaine is a helluva drug."
If you make your living or possibly have a little side business that is through illegal means. You may be surprised (or not) that you owe taxes on those earnings.
According to IRS Code you are actually required to report these earnings to the IRS and pay taxes on them. Why would somebody do this? Have you ever heard of Al Capone? He went to prison on tax evasion, not for mob activities. It fluctuates every year, but only about 1-2% of tax returns get audited, so you're rolling the dice no matter how small the chance.
Here's a few things you need to know. If you run an illegal business (pimp, gambling house, extortion, etc.) then you are allowed to deduct your normal and ordinary business expenses. Just like every other business! Are you a prostitute? Guess whose slutty outfit is now tax deductible? Yippie! Gambling house? Your rent, electricity, insurance; all deductible.
Here's the bad part for you drug dealers. If you sell drugs, then you can only deduct the "cost of goods" sold. So if you buy a kilo for $1,000 then that's the only cost you get to deduct. The gas for the cigarette boat that picks up the stash? Sorry that's not tax deductible :-(
Now just to be clear, I'm not advocating that you report this and I'm not advocating you don't report this. GO ASK YOUR LAWYER AND CPA!